The Federal Reserve has implemented a monetary policy called quantitative easing, or "QE" for short, to drive down interest rates and inject liquidity into the economy over the past several years. By purchasing large amounts of government bonds in a series of QE programs, the Fed succeeded in pushing rates lower, but may also have increased risk to bond investors.
Following the June 18-19 meeting of the Federal Open Market Committee, Chairman Ben Bernanke described how current QE policies could be gradually wound down in future months: "If the incoming data are broadly consistent with this forecast, the Committee currently anticipates that it would be appropriate to moderate the monthly pace of purchases later this year; and if the subsequent data remain broadly aligned with our current expectations for the economy, we would continue to reduce the pace of purchases in measured steps through the first half of next year, ending purchases around midyear." Chairman Bernanke went on to emphasize that the policy is in no way "predetermined" and would continue to depend on progress seen in economic data toward an unemployment rate of 6.5% with an inflation rate of 2%.
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